Corruption, Not India, Is CPEC's Biggest Threat: Forbes magazine

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Corruption, Not India, Is CPEC's Biggest Threat

Panos Mourdoukoutas, CONTRIBUTOR
Oct 9, 2017 9:54 AM 136

In this photograph taken on August 8, 2017, Pakistan railway [+]
China Pakistan Economic Corridor’s (CPEC) biggest threat isn’t India. It’s corruption.

On both ends of the partnership — China and Pakistan, which makes the ambitious project look like a “sand castle.” CPEC’s long delays and cost overruns leaves Pakistan heavily indebted, heading to the door step of IMF, as it did back in 2001.





Foreign investors have been already casting a wary eye on the situation, especially after the recent shift in U.S. policy toward Pakistan that roiled the country’s markets.

Index/Fund 3-month Performance 12-month performance
IShares China (FXI) 14.15% 17.97%
Global X MSCI Pakistan (PAK) -8.95% -17.06
iShares S&P India 50 (INDY) 1.11 5.97%

Source: Finance.yah00.com 10/4/2017

India has good reason to oppose CPEC. The project stretches through areas India considers its own, such as Pakistan-controlled Kashmir.



Then there’s an ongoing concern that CPEC, together with a string of other projects in the Indian Ocean, is part of China’s grand plan to encircle India.

But so far, New Delhi has done very little to slow down the project, other than participating in joint exercises with America and Japan to counter the China-Pakistan alliance. The joint naval exercise in the Malabar in the Bay of Bengal last July was an example of that.

Meanwhile, CPEC is lifting Pakistan out from the bottom of the world competitive rankings, as it was discussed in previous piece here. But that progress may not be sustainable. The project is facing both delays and costs overruns due to corruption on both sides of the partnership: on the China side, which plans and constructs the project, and on the Pakistani side, which oversees the execution of the project.





That’s why Beijing and New Delhi announced the creation of a “transparency” commission last year to address these issues. The problem is that such commissions rarely solve corruption — especially when it comes to projects, which are constructed and executed by the governments of countries that suffer from corruption.

Country Corruption Index in 2010 Corruption Index in 2015
China 78/168 83/168
Hong Kong 13 17
Pakistan 143 117
India 87 76
Finland 4 2
USA 22 16
Source: Transparency International

Meanwhile the cost overruns of CPEC make Pakistan more indebted to China, at a time when the country is living beyond its means. Pakistan already suffers from persistent current account deficits, government debt, and external debt in the face of declining foreign currency reserves.

And the situation will become worse as U.S. interest rates rise, and capital flow to emerging market like Pakistan reverse course.

Once again, projects like CPEC may bring Islamabad back to the doorsteps of IMF, an institution that doesn’t have a reputation for being friendly to China’s friends.





That’s especially the case after the recent shift in America’s foreign policy towards Pakistan, as it was discussed in a previous piece here.

 

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Is PML-N government mishandling the CPEC project?
October 9, 2017
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Waris Husain |

Through this piece, I would like to draw the attention of all concerned, particularly the members of parliament and all the political parties of the country to the so far neglected but essentially required need to legislate timely & properly for CPEC.

Ever since the much-vaunted project of CPEC was launched by our government with Chinese collaboration we have not seen any effort, at least apparently, by any quarter in our country to have a constitutional framework laid down for this development initiative which is supposed to radically improve the fortunes of our future generations, hence the country.

The government is requested to be fair to our coming generations and work with the honesty of purpose / the mission to cater for our national interest in this context

Those at the helm of affairs do not tire of harping on the mantra of CPEC being a “game changer” as if this magic wand shall cause all miracles in this country, without any serious work in forwarding planning and execution to this end by those responsible for managing the affairs of the country, particularly the legislator.

Let me state without any hesitation that CPEC even if it really is the proverbial ‘goose which lays golden egg’ would not really do so unless handled the right way. The government of the day seems to be least concerned with this all-important need of putting in place correct and futuristic constitutional, legal & administrative framework through requisite legislation. The ignorance is so pronounced that it amounts to outright obduracy on this issue but then no one from the opposition has raised any voice as well.

Read more: The US-Sino Great Game: Washington embraces Indian position on CPEC

Not only that the Chinese are getting all the contracts free of any competition they are also allowed to bring labor from their own country

As it appears to be , nobody I repeat nobody has given it any serious thought that “leasing state land, establishing industrial estates, developing a network of various services required to do mega economic and commercial activities etcetera, etcetera” all need to be very well planned for times to come and clearly defined rules framed to ensure seamless execution. Don’t we know that such major initiatives actually cater to future needs and our coming generations will be handling these projects and accrue their due benefits – if their forefathers(i.e. we today) had planned properly?

Let me quote from my personal experience and highlight the irresponsible behavior of the highest office holders. During a Beijing Forum moot held at NUST, Islamabad in May last year extensive and useful discussions were held for two days, for which a number of working groups were made. A number of knowledgeable participants, both Pakistani and Chinese, participated.

The only mention he made was in his closing remarks where he said that it has been recommended to him that a central controlling authority be set up by the government to deal with all the cases of CPEC

Final recommendations were prepared and given to Mr. Ahsan Iqbal, the minister responsible for coordinating CPEC activities, who came as a chief guest for the closing session. During his speech, the minister did not say anything about the CPEC except the usual political verbiage and did not even touch upon the recommendations of the house on the subject.

Read more: Will OBOR help China to overcome its economic crisis?

The only mention he made was in his closing remarks where he said that it has been recommended to him that a central controlling authority be set up by the government to deal with all the cases of CPEC, however, in his opinion this was not required and private sector should sort out these matters among themselves. Can you think of a more irresponsible reply by the minister responsible for this project- didn’t it amount simply to shirking responsibility by the minister.

Final recommendations were prepared and given to Mr. Ahsan Iqbal, the minister responsible for coordinating CPEC activities, who came as a chief guest for the closing session

Another very serious thing which has come to my notice is the way CPEC projects are being doled out to Chinese firms /contractors by NHA and other agencies of Pakistan government. The Pakistani firms/contractors are not being allowed a fair chance. Not only that the Chinese are getting all the contracts free of any competition they are also allowed to bring labor from their own country, who are generally prisoners or bonded labor and come dirt cheap to these Chinese contractors.

This is being done, as per my knowledge, without any remorse or consideration for national laws and regulations as well as at the cost & peril of our own labor. This fact may be verified on the ground, the way things are going on ‘upgradation of KKH and Abbottabad Bypass project’.

Now let me quote a good example from recent history to learn from i.e. of ‘UAE of the early 1970s’.

Read more: CPEC will not stir up Indo-Pak Trouble, says China

The government of the day seems to be least concerned with this all-important need of putting in place correct and futuristic constitutional, legal & administrative framework through requisite legislation

That was the time that country was founded with negligible resources, good natural ports being the most prominent of them all, it did not have the benefit of collective wisdom of democratic institutions as well and was ruled by autocratic rulers; yet those rulers being more sincere to the country, framed so good rules of all business at that time that the country has benefitted from these immensely to date. Has someone in the rank and file of our learned government/parliamentarians ever thought on these lines.

I request in all earnest to the saner elements across the board in the country PARTICULARLY those in the parliament to please wake up to the need of the hour and put in place a correct framework for CPEC affairs with future of the country foremost in mind. At the same time, the government is requested to be fair to our coming generations and work with the honesty of purpose / the mission to cater for our national interest in this context.

The views expressed in this article are authors own and do not necessarily reflect the editorial policy of Global Village Space.

 

[The Sandman]

That's actually a very good point corruption is a termite that eats countries from inside.

Which is a way way more dangerous than someone attacking from outside we've examples of so many empires who perished because of corruption and mismanagement.

 

[Zen0]

Another Sri Lanka in the making

 

[MultaniGuy]

Corruption is indeed the biggest problem in Pakistan.

Hopefully corruption will be tackled in Pakistan.